General Overview
According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), Spain fully observed all 10 core principles and 4 central bank responsibilities that deal with systemically important payment systems. (IMF 2006a, p. 25)
The legal framework of the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) - the only systemically important payment system in Spain - is sound. The Settlement Finality Law is fully enforceable. Irrevocability and finality are clearly defined in the law and in the regulations of the system, and they are also ensured even in the event of insolvency of a participant. The relevant rules and regulations of the SLBE system are contained in a number of documents issued and modified by the Bank of Spain - Banco de España (BE). (IMF 2006b, p. 54)
The infrastructure for clearing and settlement of payments is well-developed, modern, and functional. The SLBE has systems that offer protection against liquidity and credit risks, such as queuing mechanisms, intraday credit and bilateral and multilateral algorithms. The needs of the users are accounted for in the development of the payment infrastructure. (IMF 2006b, p. 55)
The SLBE is the Spanish Real-Time Gross Settlement (RTGS) system connected to TARGET. It has been operating since 1996. The system was developed by the BE, which also acts as the operator and overseer of the system. Most of the credit institutions in the Spanish financial system are participants in the SLBE. (BE website)
It settles domestic and cross-border transfers, secondary markets transactions, multilateral net systems and monetary policy operations. Besides, checks and credit transfers that are communicated to the National Electronic Clearing House - Sistema Nacional de Compensación Electrónica (SNCE) with values above € 50,000 are transmitted to the SLBE and settled in gross terms and real time in this latter system. The SLBE also settles the net balances that arise from the clearing of the operations carried out with payment cards; these net balances are calculated and communicated to the BE by the three card networks. Finally, the SLBE offers additional services such as the matching, registering and procurement of transactions statistics. Through the SLBE, the participating institutions can manage the liquidity of their accounts held at the different branches of the BE. The participants may initiate money transfers between those accounts depending on their liquidity needs. (BE website)
TARGET, the Trans-European Automated Real-time Gross settlement Express Transfer system, is the RTGS (real-time gross settlement) system for the euro and, since it started live operations back in 1999, has been the market's preferred system for large-value payments in euro, making it one of the world's largest large value payment systems. Consequently, TARGET is instrumental in promoting the integrated euro area money market, which is a prerequisite for the effective conduct of the single monetary policy, and furthermore contributes to the integration of the euro financial markets. The compliance of TARGET with the "Core Principles for Systemically Important Payment Systems" is verified as part of the TARGET oversight. On 24 October 2002 the Governing Council of the European Central Bank (ECB) decided on the long-term strategy for TARGET, known as TARGET2. TARGET2 is designed to enable the Eurosystem to meet new demands from its users, including those from the ten new Member States that joined the EU on 1 May 2004. The TARGET system also attracts a variety of other payments on account of its real-time settlement service in central Bank money and its broad market coverage. (ECB 2006, p. 5, p. 6)
The Bank of Spain - Banco de España (BE) is an important player in the payment system and has a well-established and cooperative relationship with the financial sector. Its role and responsibilities are clearly defined in the law, including the oversight function. The BE complies with its oversight function to ensure the safety and efficiency of payment systems. (IMF 2006b, pp. 54-55)
The infrastructure for clearing and settlement of payments is well developed, modern and functional. The SLBE has systems that offer protection against liquidity and credit risks, such as queuing mechanisms, intraday credit and bilateral and multilateral algorithms. The needs of the users are accounted for in the development of the payment infrastructure. The introduction of the liquidity reservation facility is an example of requirements fulfilled by the BE. However, the BE should monitor the use of this facility to avoid possible discrimination against certain payments that may have to wait until the end of the day to be settled and to make sure that it does not unduly prevent the central BE from debiting accounts during the day. (IMF 2006a, p. 11)
The Principles
I. The system should have a well-founded legal basis under all relevant jurisdictions. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), Spain fully observed all 10 core principles and 4 central bank responsibilities that deal with systemically important payment systems. The legal framework of the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) - the only systemically important payment system in Spain - is sound. The Settlement Finality Law is fully enforceable. Irrevocability and finality are clearly defined in the law and in the regulations of the system, and they are also ensured even in the event of insolvency of a participant. The relevant rules and regulations of the SLBE system are contained in a number of documents issued and modified by the Bank of Spain - Banco de España (BE). Furthermore, an assessment by the European Central Bank (ECB) in 2004 found Spain's SLBE to be fully compliant with the Core Principles for Systemically Important Payment Systems.
II. The system's rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur through participation in it. |
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International Monetary Fund, "Spain: Financial Sector Assessment Program - Detailed Assessment of the CPSS Core Principles for Systemically Important Payment Systems," Country Report No. 06/221, Washington, D.C.: IMF, June 14, 2006. Available from International Monetary Fund website. Accessed on October 03, 2006. (IMF 2006a)
International Monetary Fund, "Spain: Financial System Stability Assessment including Reports on the Observance of Standards and Codes on the following topics: Banking Supervision, Insurance Supervision, Securities Supervision, Payment Systems, Securities Settlement Systems, and Financial Policy Transparency," Country Report No. 06/212, Washington, D.C.: IMF, June 14, 2006. Available from International Monetary Fund website. Accessed on September 20, 2006. (IMF 2006b)
European Central Bank, "Assessment of Euro Large-Value Payment Systems Against the Core Principles," May 2004. Available from European Central Bank website. Accessed on September 20, 2006. (ECB 2004)
III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks. |
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Bank of Spain - Banco de España (BE)
Ministry of Economy and Finance - Ministerio de Economia y Hacienda (ME)
European Central Bank (ECB)
European System of Central Banks and the Committee of European Securities Regulators (ESCB-CESR)
IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day. (Systems should seek to exceed the minima included in this Core Principle.) |
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Settlement Finality Law No. 41/1999, November 1999 - Sobre Sistemas de Pagos y de Liquidación de Valores Ley 41/1999, noviembre 1999 (in Spanish only)
Cross Border Transfers between EU-Member States Law No. 9/1999, April 1999 - Se regula el régimen jurídico de las transferencias entre Estados miembros de la Unión Europea Ley 9/1999, Abril, 1999. (in Spanish only)
European Union Directive on Settlement Finality in Payment and Securities Settlement Systems, Directive 98/26/EC), 1998
V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation. (Systems should seek to exceed the minima included in this Core Principle.) |
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Bank of Spain - Banco de España (BE) website. Accessed on September 20, 2006. (BE website)
European Central Bank, "TARGET Annual Report, 2005," May 2006. Available from the European Central Bank website. Accessed on September 20, 2006. (ECB 2006)
VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), Spain fully observed all 10 core principles and 4 central bank responsibilities that deal with systemically important payment systems. (IMF 2006a, p. 25)
The legal framework of the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) - the only systemically important payment system in Spain - is sound. The Settlement Finality Law is fully enforceable. Irrevocability and finality are clearly defined in the law and in the regulations of the system, and they are also ensured even in the event of insolvency of a participant. The relevant rules and regulations of the SLBE system are contained in a number of documents issued and modified by the Bank of Spain - Banco de España (BE). (IMF 2006b, p. 54)
The infrastructure for clearing and settlement of payments is well-developed, modern, and functional. The SLBE has systems that offer protection against liquidity and credit risks, such as queuing mechanisms, intraday credit and bilateral and multilateral algorithms. The needs of the users are accounted for in the development of the payment infrastructure. (IMF 2006b, p. 55)
The SLBE is the Spanish Real-Time Gross Settlement (RTGS) system connected to TARGET. It has been operating since 1996. The system was developed by the BE, which also acts as the operator and overseer of the system. Most of the credit institutions in the Spanish financial system are participants in the SLBE. (BE website)
It settles domestic and cross-border transfers, secondary markets transactions, multilateral net systems and monetary policy operations. Besides, checks and credit transfers that are communicated to the National Electronic Clearing House - Sistema Nacional de Compensación Electrónica (SNCE) with values above € 50,000 are transmitted to the SLBE and settled in gross terms and real time in this latter system. The SLBE also settles the net balances that arise from the clearing of the operations carried out with payment cards; these net balances are calculated and communicated to the BE by the three card networks. Finally, the SLBE offers additional services such as the matching, registering and procurement of transactions statistics. Through the SLBE, the participating institutions can manage the liquidity of their accounts held at the different branches of the BE. The participants may initiate money transfers between those accounts depending on their liquidity needs. (BE website)
TARGET, the Trans-European Automated Real-time Gross settlement Express Transfer system, is the RTGS (real-time gross settlement) system for the euro and, since it started live operations back in 1999, has been the market's preferred system for large-value payments in euro, making it one of the world's largest large value payment systems. Consequently, TARGET is instrumental in promoting the integrated euro area money market, which is a prerequisite for the effective conduct of the single monetary policy, and furthermore contributes to the integration of the euro financial markets. The compliance of TARGET with the "Core Principles for Systemically Important Payment Systems" is verified as part of the TARGET oversight. On 24 October 2002 the Governing Council of the European Central Bank (ECB) decided on the long-term strategy for TARGET, known as TARGET2. TARGET2 is designed to enable the Eurosystem to meet new demands from its users, including those from the ten new Member States that joined the EU on 1 May 2004. The TARGET system also attracts a variety of other payments on account of its real-time settlement service in central Bank money and its broad market coverage. (ECB 2006, p. 5, p. 6)
The Bank of Spain - Banco de España (BE) is an important player in the payment system and has a well-established and cooperative relationship with the financial sector. Its role and responsibilities are clearly defined in the law, including the oversight function. The BE complies with its oversight function to ensure the safety and efficiency of payment systems. (IMF 2006b, pp. 54-55)
The infrastructure for clearing and settlement of payments is well developed, modern and functional. The SLBE has systems that offer protection against liquidity and credit risks, such as queuing mechanisms, intraday credit and bilateral and multilateral algorithms. The needs of the users are accounted for in the development of the payment infrastructure. The introduction of the liquidity reservation facility is an example of requirements fulfilled by the BE. However, the BE should monitor the use of this facility to avoid possible discrimination against certain payments that may have to wait until the end of the day to be settled and to make sure that it does not unduly prevent the central BE from debiting accounts during the day. (IMF 2006a, p. 11)
VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp.7, 25)
All relevant laws and regulations are fully enforceable and provide a well established legal foundation. (IMF 2006a, p. 13)
Law 41/1999 (the Settlement Finality Law) provides the general legal framework for the payment and securities settlement system. The law states the irrevocability and finality of payment orders and recognizes the legal validity of clearing agreements. It also establishes the procedures and consequences of legal insolvency, and covers clearing agreements, transfer orders, and the collateral deposited in the system. The law establishes expeditious proceedings for the execution of collateral in case of default. Insolvency proceedings do not have retroactive effects on payment orders or collateral that have been put through the payment system. (IMF 2006b, p. 54)
Further, Law 13/1994 on the Autonomy of the Bank of Spain - Banco de España (BE), establishes that the central bank is in charge of promoting the well functioning of the national payment system. It also empowers the BE to oversee and regulate clearing and settlement systems through circulars, and to suspend, when necessary, the application of the decisions adopted by the managing body of the payment systems. The Law also empowers the BE to manage the system. (IMF 2006a, p. 13)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle.(ECB 2004, p. 9)
VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp.7, 25)
The SLBE operating rules and procedures are described in the manual of the SLBE and comprise Circulars, Technical Applications and Communications of the Bank of Spain - Banco de España (BE). These regulations and communications explain the details of the system's design, its timetable, intraday credit access, risk management procedures, the system's legal basis, and the rights and obligations of the parties. (IMF 2006a, pp. 13-14)
However, the FSSA notes that although rules and regulations address all the relevant aspects of the system, they are contained in a number of circulars which are quite difficult to follow, so it recommends that the BE consolidate its payment circulars to improve readability and transparency for participants. BE staff has indicated that efforts in this direction are in progress. (IMF 2006b, pp. 54-55)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle. (ECB 2004, p. 9)
IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp.7, 25)
The Real-Time Gross Settlement System, SLBE has systems that offer protection against liquidity risks, such as queuing mechanisms, intraday credit and bilateral and multilateral algorithms. Credit risk does not arise among participants as transactions are processed in real time and are final and irrevocable when accepted by the system, as long as the sender of the transaction has enough funds in its account or sufficient collateral.The needs of the users are accounted for in the development of the payment infrastructure. The introduction of the liquidity reservation facility is an example of requirements fulfilled by the Bank of Spain - Banco de España (BE). (IMF 2006a, p. 15; IMF 2006b, p. 55)
The liquidity reservation facility is very useful for participants to manage their liquidity. However, the BE should monitor the use of this facility to avoid possible discrimination against some payments that may have to wait until the end of the day to be settled and to make sure that it does not unduly prevent the central bank from debiting accounts during the day. (IMF 2006a, p. 16)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle. (ECB 2004, p. 9)
X. The system's governance arrangements should be effective, accountable and transparent. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp.7, 25)
The rules of SLBE (Circular 3/2000 of May 31) define acceptance, irrevocability and finality of the transactions, according to the Settlement Finality Law. The SLBE is a real time gross settlement system. Transactions are irrevocable from the moment they are accepted by the system. They are final from the moment the account of the institution involved is debited. Real time gross settlement (RTGS) transactions submitted to the system are "accepted for settlement" only when the sender's account in the central bank has enough funds or intraday credit (fully collateralized) is available. Transactions wait in a queue until funds are available. Payment orders cannot be revoked, cancelled or modified by the originator. Once the payment has been settled it is irrevocable and final. The working hours of the SLBE ensure a final settlement on the day of value. (IMF 2006a, p. 16)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle. (ECB 2004, p. 9)
A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle is not applicable to Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp. 7, 25)
This Principle is not applicable to Spain's payment system, as the SLBE is a real time gross settlement (RTGS) system. (IMF 2006a, p. 16)
B. The central bank should ensure that the systems it operates comply with the Core Principles. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp. 7, 25)
The system operates and settles in central bank money. Participants have a centralized account ("cuenta única") or Treasury Accounts with the Bank of Spain - Banco de España (BE) and the payments processed by the SLBE are settled in these accounts. There is no credit risk or liquidity risk incurred by the participants with respect to the settlement agent and with respect to the settlement asset. (IMF 2006a, p. 17)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle. (ECB 2004, p. 9)
C. The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp. 7, 25)
The general security policy of the Bank of Spain - Banco de España (BE) defines and assigns the responsibilities for the operation, administration and maintenance of the SLBE, and the IT infrastructure that supports the system responds to it. Participants are subject to confidentiality, integrity, identification and authentication requirements set by BE. The entire system is subject to a risk management procedure in which all incidents are registered, monitored and analyzed. (IMF 2006a, p. 17)
There are contingency plans to assure continuity in the SLBE. However, the procedures in the manual of the SLBE should give clearer guidance on the expected behavior of participants in case of emergency situations. For instance, the procedures in case of failure of the platform of a participant or the SLBE should be clearly established. Although the BE conducts regular testing of the contingency plan with the cooperation of system participants, it is recommended to establish that participants have in place clear internal policies and procedures, and carry out operating audits. A periodic review of the IT infrastructure by participants to avoid operational risks is recommended. The distance of the external backup center from the main site should also be evaluated to make sure that it is sufficient in case of events such as natural disasters or acts of terrorism. (IMF 2006b, p. 55)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle. (ECB 2004, p. 9)
D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities. |
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According to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), this principle was fully observed by Spain's systemically important payment system, the Bank of Spain Settlement Service - Servicio de Liquidaci del Banco de España (SLBE) ), which is the only systemically important payment system in Spain. (IMF 2006a, pp. 7, 25)
The SLBE is an efficient channel for interbank payments and provides a means for the settlement of ancillary clearing systems with finality of payments. As long as there are enough funds in the account, the end-to-end processing time, from the moment a participant introduces an order to its final execution, is less than a second for national operations. (IMF 2006a, p. 20)The system provides alternatives in communication (direct, SWIFT) in order to optimize participants' investment. The system has enough capacity to cope with the current level of demand. It is permanently monitored so that, in case of an unexpected increase in the number of transactions, the Bank of Spain - Banco de España (BE) is prepared to stop other processes, if necessary, to give priority to the SLBE. (IMF 2006a, p. 20)
The SLBE provides all the services of a modern real time gross settlement (RTGS) system in an efficient way. Up to date, the BE has not received complaints from any of the participants. (IMF 2006a, p. 20)The needs of the users are accounted for in the development of the payment infrastructure. (IMF 2006b, p. 55)
Furthermore, according to the 2004 European Central Bank (ECB) assessment Spain's payment system was assessed as fully observing this Principle. (ECB 2004, p. 9)
Spain