Ireland’s Payment and Securities Settlement Systems Infrastructure 2nd edition April 2020 Ireland’s Payment and Securities Settlement Systems Infrastructure Central Bank of Ireland Page 2 Contents Foreword by Sharon Donnery, Deputy Governor ................................. 4 1 Introduction and Overview .................................................................. 7 1.1 Introduction .....................................................................................................................7 1.2 Payment Systems ...........................................................................................................7 1.2.1 Payment systems/schemes in Ireland .....................................................9 1.3 Securities Settlement Systems (SSSs) .................................................................. 10 1.3.1 Central Securities Depositories (CSD) ................................................. 10 1.3.2 CSDs serving the Irish market ................................................................. 10 1.3.3 Central Counterparty (CCP) .................................................................... 10 1.4 Oversight of FMIs ....................................................................................................... 11 1.4.1 Oversight standards .................................................................................... 13 1.5 Payment system classification in the euro-area .............................................. 13 1.5.1 Lead Overseer ............................................................................................... 15 1.5.2 Oversight assessment process in the euro-area ............................... 15 2 Ireland’s Payment Ecosystem: Payment Instruments .............. 17 2.1 Cash and Cheques ....................................................................................................... 17 2.2 Credit Transfers and Direct Debits ...................................................................... 17 2.3 Payment Cards ............................................................................................................. 18 2.4 E-money .......................................................................................................................... 19 2.4.1 Consumer usage of e-money .................................................................... 20 3 Ireland’s Payment Ecosystem: Clearing ........................................ 21 3.1 Automated Clearing House ..................................................................................... 21 3.1.1 Irish participants in STEP2 ........................................................................ 21 3.1.2 Settlement cycles in STEP2 ...................................................................... 21 3.2 Card Payment Schemes ............................................................................................ 23 3.3 IPCC ................................................................................................................................. 23 3.4 Oversight and Resilience .......................................................................................... 23 3.4.1 STEP2 ............................................................................................................... 23 3.4.2 Card payment schemes – VISA, Mastercard ...................................... 24 3.4.3 IPCC .................................................................................................................. 25 3.4.4 Major Incident Reporting .......................................................................... 25 4 Ireland’s Payment Ecosystem: Settlement ................................... 26 4.1 Real-time Gross Settlement system ..................................................................... 26 4.1.1 Participation in TARGET2-IE ................................................................... 26 4.1.2 Role of the National Central Bank (TARGET2) ................................. 26 4.1.3 System Resilience and Contingency ...................................................... 27 4.2 EURO1 ............................................................................................................................ 28 4.3 Oversight and Regulation ........................................................................................ 29 4.4 Major Incident Reporting ......................................................................................... 29 5 Ireland’s Securities Clearing and Settlement Systems .............. 30 5.1 Settlement Finality ..................................................................................................... 30 5.2 Regulation of Securities Settlements and Clearing Systems....................... 30 5.3 Settlement of Irish securities .................................................................................. 32 5.3.1 Irish Government Bonds .......................................................................... 32 5.3.2 Irish Equities ................................................................................................. 32 5.3.2.1 CCP Clearing for Euronext Dublin ....................................................... 33 5.4 Oversight of Securities Clearing and Settlement Systems ......................... 34 5.4.1 Departure of the UK from the EU .......................................................... 35 Ireland’s Payment and Securities Settlement Systems Infrastructure Central Bank of Ireland Page 3 6 Oversight of other FMIs ...................................................................... 36 6.1 Foreign-Exchange Settlement – Continuous Linked Settlement ............. 36 6.1.1 Oversight of CLS ........................................................................................... 36 6.2 Trade Repositories...................................................................................................... 36 6.3 Oversight of critical service providers ................................................................ 36 7 Market Infrastructure developments in Ireland ......................... 38 7.1 Interconnectedness of participants...................................................................... 38 7.2 National Payments Plan ............................................................................................ 40 7.3 Stakeholder engagement ......................................................................................... 41 7.3.1 The Irish Retail Payments Forum (IRPF) .............................................. 41 7.3.2 National Stakeholder Groups (NSGs) ................................................... 41 7.3.3 Innovation Hub ............................................................................................. 41 7.3.4 Promoting Cyber Resilience ..................................................................... 42 7.4 Future Developments ................................................................................................ 43 7.4.1 SEPA Instant Credit Transfers ................................................................ 43 7.4.2 Eurosystem retail payments strategy ................................................... 45 7.4.3 Evolution of oversight frameworks ....................................................... 45 Appendix 1: Single Euro Payments Area (SEPA) ................................. 46 Appendix 2: Payment Services Directive.............................................. 49 Appendix 3: Ireland’s National Payments Plan (NPP) ....................... 51 Glossary of terms .......................................................................................... 52 List of Abbreviations .................................................................................... 56 Ireland’s Payment and Securities Settlement Systems Infrastructure Central Bank of Ireland Page 4 Foreword by Sharon Donnery, Deputy Governor One of the statutory objectives of the Central Bank of Ireland (the Central Bank) is to ensure that “payment, settlement, and currency systems are safe, resilient and efficient and that access to such systems is not restricted”. Financial stability, a core mandate of the Central Bank, is heavily supported by, and dependent on, the smooth functioning of the payments system. These two objectives are at the core of the publication of this paper - enhancing our awareness and understanding of some of the current infrastructures and systems that the Irish market and consumers are reliant upon. This understanding is crucial as we look ahead to the next decade. The payments system covers a wide range of transactions at all levels of the financial system and the choice of payment instruments in the Irish economy continues to increase. From consumer and business instruments such as credit transfers, direct debits, credit or debit cards, cash and cheques; to the clearing level of financial institutions such as interbank clearing or card payment schemes, up to settlement in central bank money. This paper focuses on electronic payments and securities settlements systems, and how they are adapting to the technological change that is re- shaping the financial sector, presenting challenges to banks, businesses and people alike. While developments in relation to cash are outside the scope of this paper, the Central Bank continues to consider the development of all payment instruments, including cash, to ensure market participants have appropriate choice to support their transactions. As set out in our Strategic Plan (2019 – 2021), the