Oversight is a function of Eesti Pank under the Eesti Pank Act.

The aim of oversight is to promote the safety and efficiency of payment and settlement systems by identifying and analysing risks to the systems and making recommendations for ways to minimise risks and make the system more efficient.

Oversight covers:

  • analysing the structure and operation of payment and settlement systems;
  • giving recommendations to operators of payment and settlement systems;
  • setting requirements for operators of payment and settlement systems and for the structure and operation of the systems;
  • approving the rules and principles for the operation of payment systems.

Eesti Pank bases its oversight work on the framework for oversight of payment and settlement systems.

Principles

The priority for Eesti Pank is to oversee the domestically operated systemically important payment and settlement systems, for which Eesti Pank has the sole oversight responsibility.

Eesti Pank also oversees non-systemically important payment and settlement systems and participates in the cooperative oversight work of the Eurosystem. In overseeing the payment and settlement systems that are not systemically important and in contributing to the oversight of pan-European payment and settlement systems, Eesti Pank uses the principles of relative importance and risks to assess the impact of these systems on financial stability, the implementation of monetary policy and the smooth functioning of currency circulation.

Oversight of payment and settlement systems is done independently. To make certain of this independence, Eesti Pank has put measures in place that reduce the chances of any conflict of interest between the operation and the oversight of the systems.

Oversight requirements

Eesti Pank uses the international CPSS-IOSCO principles for financial market infrastructure adopted for oversight by the Eurosystem in assessing payment systems, securities settlement systems, central depositories, central counterparties and trade repositories. For payment systems, Eesti Pank also uses the ECB regulation giving requirements for overseers of systemically important payment systems and the oversight framework for retail payments.

The CPSS-IOSCO principles used for oversight cover minimisation of risks and recommendations for efficiency in:

  • general organisation of the system;
  • credit and liquidity risk management;
  • settlement;
  • requirements for central securities depositories;
  • default management;
  • general business and operational risk management;
  • system access;
  • efficiency;
  • transparency.

The mandate of the Committee on Payment and Settlement Systems (CPSS) hosted by the Bank for International Settlements (BIS) was renewed and the committee was renamed as the Committee on Payments and Market Infrastructures (CPMI) as of 1 September 2014.

Oversight assessment

Regular monitoring and analysis of the payment and settlement systems it oversees are used by Eesti Pank in its general assessment of the operation of payment and settlement systems.

Eesti Pank assesses how well the systems it oversees meet the oversight requirements at least once every two years. The assessment is done to make sure that the rules and procedures of the system are reducing risks in the system to the appropriate extent.

The results of both the regular general assessment and the compliance with the requirements are published in the Eesti Pank Financial Stability Review.

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