Payment System Oversight
Payment systems, as a group of instruments, procedures and rules for the transfer of funds between two or more participants, are vitally important for the economic and financial activities in a country. In well-functioning financial systems, payment transactions are timely and safely transferred and executed, and as such, they support financial stability and foster the growth. As opposed to that, errors and problems in the payment system performance can be very expensive; moreover, they can be substantially more expensive for entire economy than for owner and participants in the system.
Payment system oversight is the function of the Central Bank of Montenegro which ultimate objective is to contribute to safe and efficient functioning of the payment systems in Montenegro and thus, to the financial stability in the country, which is one of the key responsibilities of the Central Bank.
Safety refers to how well risks connected with the realisation of processes in the payment system are understood, measures and controlled. These risks include liquidity, credit, legal and operational risks, as well as general business risk that can include system component in a situation when inability of one or several participants to perform the activity results in inability of other participants to meet their obligations on time, which further can result in a series of adverse consequences. Inability of the payment system to settle payment transactions for any reason can have significant adverse impact on markets it serves and economy in general.
Efficiency refers, in general, to what extent and in which manner effective relevant entities in a payment system (operator, participants in the payment system) use resources for the performance of their functions.
The Central Bank of Montenegro oversees large-value payment systems in Montenegro and retail payment systems, which are of importance for intraday operations/activities of Montenegrin economy and the confidence of the public in the mechanisms and manner of executing payment transactions. In addition, the oversight activities are focused on the payment system as a whole.
In performing its duties with respect to the payment system oversight, the Central Bank of Montenegro applies principles and practices that are based on the international principles and best practices and standards and rules determined by the European Central Bank. Therefore, in the process of assessment of payment system compliance, the Central Bank of Montenegro has applied, from the beginning of 2016, a set of principles which are based on the principles published by the Committee on Payments and Market Infrastructures of the Bank for International Settlements and the International Organization of Securities Commissions – Principles for Financial Market Infrastructures.
A payment system operator is primarily responsible for reliable functioning of the payment system and consequently, it is expected to provide the compliance of the system it operates with the adopted standards.
The Central Bank of Montenegro is transparent with regard to its oversight function and it publishes the results of its activities from this area in the Central Bank of Montenegro Annual Report.
Relevant International Standards
Bank for International Settlements – Committee on Payments and Market Infrastructures
European Central Bank