Declaring a payment system as a “Controlled System” or a “Designated Controlled System”

A payment system is a system of rules, instruments, or procedures for the transfer and execution of payment instructions between its participants, including its operators.

Conditions for a declaration

In accordance with Section 2 of the Payment Systems Law, 5768–2008, there are two cumulative conditions under which the Bank of Israel Governor is permitted to declare a payment system as a “Controlled System”:

• When the system’s activity is essential to the entire payments array in the economy;
• When there is concern that the system’s activity is being conducted improperly, inefficiently, or unreliably, and may damage the payments array in the economy.

In accordance with Section 3 of the Payment Systems Law, 5768–2008, there are three cumulative conditions under which the Bank of Israel Governor is permitted to declare a payment system as a “Designated Controlled System”:

• When the system’s activity is essential to Israel’s monetary and financial stability;
• When there is concern that the system’s activity is being conducted improperly, inefficiently, or unreliably, and may damage Israel’s monetary and financial stability;
• When it is important to apply the provisions of the Payment Systems Law concerning the finality of payments in the system and the protection of payments from a situation in which one of the system’s participants is dissolved, in order to maintain Israel’s monetary and financial stability.

Considerations for a declaration

Section 4 of the Payment Systems Law, 5768–2008 sets out that when declaring a system as a controlled system or as a designated controlled system, the Bank of Israel Governor is permitted to take a number of factors into account, including the following:

• The total estimated monetary sum of payment instructions received or executed in the system on an ordinary day;
• The estimated number of payment instructions received or executed in the system on an ordinary day;
• The number of participants in the system;
• The connection between the system and other controlled systems or the Stock Exchange Clearinghouse;
• The extent of the system’s impact on the Israeli currency.