SBP Asks Financial Institutions to Follow Designated Payment System

The central bank directed financial institutions to streamline their business and operations based on the Designated Payment System.

Payment systems are arrangements designed to facilitate or control the transfer of money between financial institutions who participate in the arrangement. Moreover, Designated Payment Systems (DPS) are usually Systemically Important Payment Systems (SIPS). Any deficiency in their designs or disruption in their operations can potentially endanger the working of the real economy besides the financial markets.

The “Designated Payment Systems” can include payment systems operated by both the State Bank of Pakistan and private entities.

Designated Payment System ensure compliance with the global standard of Payment Systems Oversight like Principles for Financial Market Infrastructure (PFMI).

Purpose of DPS

The Designated Payment System may be required to regularly provide information on the respective payment system in the form of reports and data. The purpose of the reporting requirement is to provide a transparent mechanism for providing relevant information to participants, SBP, and any other stakeholders besides enabling SBP to effectively oversee the system.

The Designated Payment System has ceased to operate effectively as a Payment System if the operator has knowingly furnished information or documents which are false or misleading. The operator or settlement institution of the Designated Payment System is in the course of being wound up or otherwise dissolved, whether its in Pakistan or elsewhere.

Designation aims at ensuring efficient management of various risks associated with the operations of DPS including but not limited to legal, credit, liquidity, settlement, operational, general business, custody, and other risks. DPS will be subject to comprehensive oversight of the operational and governance arrangements by SBP in order to promote the smooth operation of safe and efficient payment systems.

State Bank of Pakistan, under the Payment Systems and Electronic Fund Transfer (PS & EFT) Act 2007, is responsible for regulating the payments and settlement systems in Pakistan. SBP, in this connection, has powers to operate, regulate and inspect Payment and Settlement Systems in Pakistan to promote financial and monetary stability.

State Bank of Pakistan has warned financial of penalties in case of violation of of the Designated Payment System is found in non-compliance of the regulations, rules, or standards issued by SBP from time to time.