Payment Systems Oversight

Payment and settlement systems oversight is a central bank function that regulates the payment and settlement systems in the economy, with the aim of ensuring their stability, efficiency, and proper functioning, through regulations, assessments, and examinations.

In accordance with Section 2 of the Payment Systems Law, 5768–2008, there are two cumulative conditions that must be met in order for the Governor to declare a payment system a “controlled system”:

• The system’s operation is essential to the entire payments array in the economy;
• There is concern that the system’s improper, inefficient, or unreliable operation may impair the payments array in the economy.

In accordance with Section 3 of the Payment Systems Law, 5768–2008, there are three cumulative conditions that must be met in order for the Governor to declare a payment system a “designated controlled system”:

• The system’s operation is material for monetary and financial stability in Israel;
• There is concern that the system’s improper, inefficient, or unreliable operation may impair monetary and financial stability in Israel;
• It is important to apply the provisions of the Payment Systems Law concerning finality of payments in the system and protection of payments from the dissolution of one of the system participants, in order to maintain monetary and financial stability in Israel.

The PFMI are international standards for supervising financial market infrastructure: payment systems, securities centers, securities systems, main counterparties, and trade databases.  The principles were published in April 2012 by the Committee for Payment and Settlement Systems (CPSS) and the CPSS-IOSCO, with the aim of ensuring the efficiency and stability of payment systems.  On November 20, 2014, the Bank of Israel—like many other central banks—announced the adoption of the CPSS-IOSCO principles and their application to the payment systems in Israel that have been declared controlled systems.  This was done in conjunction with the various regulators.

The Oversight Directives are a tool of the Payment Systems Oversight Division for setting out rules and standards for the Designated Controlled Payment Systems

In accordance with the Payment Systems Law, a payment system operator is the entity responsible for operating the payment system.

In accordance with the Payment Systems Law, a payment system participant is an entity that is permitted to issue or transfer payment instructions directly in the payment system, and that is defined as a participant pursuant to the system rules.