Payments Regulation and the Systemic Perimeter: Consultation and Call for Evidence

Following the 2022 call for evidence and consultation on the review of the applicability of the Bank of England’s existing regulatory perimeter over payment systems, the government’s principles in approaching any reforms, and potential adjustments to the framework of the Banking Act 2009, the HM Treasury have now issued a consultation outcome paper in this context. Therein, the government briefly describes the responses it has received from „a range of financial services actors operating within the sector, including payment services and e-money providers, payment system operators and trade and business associations“, and sets out the Government’s overall approach to enabling the needed reforms through primary legislation.
To recap, the call for evidence and consultation aimed to modernize the Bank of England’s systemic payments sector to address evolving risks while promoting innovation and competition. Proposals included redefining the recognition of systemic risk, refining regulatory powers, clarifying oversight arrangements, and improving accountability measures in line with broader financial regulations.
In the outcome paper feedback from 23 respondents is considered, addressing perspectives, questions, and issues raised. Feedback analysis reveals strong support for reforming the Bank of England’s systemic payments perimeter to align with evolving financial stability risks. Majority agree with the approach of reforming through Part 5 of the Banking Act, granting Treasury control. Practical implications of legislative changes are a focus, particularly assessing systemic risk across payments and communication with the sector.
A forthcoming public statement will outline the legislative strategy, while the Bank of England will define its supervisory approach for the expanded perimeter. Unanimous support is received for empowering the FCA and PSR with relevant powers over retained EU law for payment services. Statutory instruments have been laid following the Chancellor’s July 2023 Mansion House address.
The government launches the Smarter Regulatory Framework program in tranches, incorporating Payment Services Regulations 2017 and Electronics Money Regulations 2011. The government’s review seeks stakeholder input on improving the Senior Managers & Certification Regime (SM&CR) while adhering to international standards. Responses are being processed, and next steps will be set out in collaboration with regulators. Extending SM&CR to recognized systemic payments entities and authorized PSPs and EMIs will be addressed after a broader review.
Secondary legislation will reform the PSR’s payment system access framework, revoking Part 8 of the Payment Services Regulations 2017. Respondents support simplification and alignment within Part 5 of FSBRA, retaining elements like the ‚POND‘ criteria. Further detail on framework reform is provided in Chapter 2. Proposed PSR framework changes will necessitate future Acts of Parliament, with policy statements to follow.
The discussed topics and its responses correlate to the following topics:
– Approaching reforms to the Bank’s systemic perimeter
– Providing powers for the Bank’s role in supervising over a revised systemic payments perimeter
– Holding the Bank accountable for its revised systemic payments perimeter
– Considerations of the Future Regulatory Framework Review in relation to payments
– Extending the Senior Managers & Certification Regime to payments
– Making enhancements to the Payment Systems Regulator’s legislative framework in FSBRA 2013