Payment Systems


Market economies are characterised by a large number of payment transactions every day. Payment systems and securities settlement systems provide channels through which funds may be transferred among credit and other institutions to discharge payment obligations from financial markets and across the entire economy; allowing financial obligations to be settled securely and efficiently. This function makes payment systems and securities settlement systems critical to the effective operation of financial systems worldwide.

Central banks, as issuers of money, assume a prominent role in the payment, clearing and settlement landscape. Thus, the smooth functioning of such systems is crucial to both the implementation of the bank’s monetary policy and to maintain stability and confidence in the currency. Thus, the European Central Bank applies oversight standards to payment systems and to securities clearing and settlement systems which operate in euro.

By virtue of article 34 of the Central Bank of Malta Act, the Bank, also as part of the Eurosystem, is responsible for regulating and overseeing payment systems and securities clearing and settlement systems.

The oversight function focuses on three types of financial transactions, namely, large-value funds transfer systems, retail payment systems and securities clearing and settlement systems. The Regulation and Oversight Office at the Central Bank of Malta is responsible for overseeing these systems. Biennially, the Regulation and Oversight Office assesses these securities settlement systems, as well as the links of these systems to other systems. The principles and standards applied are in line with internationally established standards that have recently been reviewed by the Committee on Payment and Settlement Systems (CPSS) and by the International Organization of Securities Commissions (IOSCO) for financial market infrastructures.

The Oversight Policy Document outlines the principles and provides the guidelines which the Central Bank of Malta follows when conducting payment systems oversight. The document gives an overview of the oversight process and methodology used to fulfil requirements and objectives.

A Memorandum of Understanding, signed on 5 January 2011 between the Central Bank of Malta and the Malta Financial Services Authority, regulator of credit and financial institutions in Malta, establishes procedures to provide for mutual exchange of information. This was undertaken to further ensure financial stability within the financial system in Malta and to cover the regulation, oversight, and the smooth running of payment and securities settlement systems in Malta.