Part 9: Payment Systems
Chapter 1: Designation of Systemically Important Payment Systems
Article 101
SAMA shall consider the following criteria in order to determine whether a Payment System is, or is likely to become, a Systemically Important Payment System:
(a) Whether the Payment System could pose a risk to financial stability in the Kingdom or could trigger or transmit systemic disruption to the other Payment Systems. Factors informing this may include size, criticality, interconnectedness to the financial markets and the
absence of alternative Payment Systems;
(b) Evaluating the Payment System’s degree of connection to financial market infrastructures, whether within or outside the Kingdom, including settlement and clearing systems;
(c) The estimated aggregate value, average value, or volume of transfer orders transferred, cleared or settled through the Payment System on a normal day on which the Payment System is operational and the nature of those transfer orders; and
(d) The estimated number of direct and indirect Members in the Payment System. Article 102
(1) Where SAMA determines that it will commence a designation assessment under Article 101 provisions, SAMA shall issue a notice to the Operator. Such designation assessment may occur simultaneously with the licensing of an Applicant and a designation assessment may occur more than once according to the cases determined by SAMA (for instance, in the event that the previous designation assessment resulted in recommendations for re-assessment or if it was found through the results of the assessment that the payment system may become a Systemically Important Payment System
(2) The operator, its staff and senior management, its board members, and its critical service providers, as well as their agents and any other relevant Persons shall cooperate with SAMA and provide all the documents, information and data related to the characteristics of the Payment System, and clarify its standing against the designation criteria.
(3) SAMA may require of the Operator or other relevant Persons- whether they were established, located or incorporated in the Kingdom or outside the Kingdom- that:
(a) Data or information or documents regarding the Payment System and its operations are made available as SAMA may determine.
(b) Access to the Operator’s staff or such other Persons or representatives is granted to SAMA; and
(c) Such reports or assessments as SAMA determines are necessary to facilitate its determination are provided.
(4) Notwithstanding other applicable laws, SAMA may coordinate with any competent central bank or regulatory authority in other jurisdictions for the purpose of requesting such data or information or documents as may be relevant to a designation assessment.
(5) SAMA shall determine the duration of the designation process depending on the particular circumstances of each case, including the nature and complexity of the Payment System and the interconnection of its operations.
(6) Before deciding on the designation, SAMA may coordinate with the formal representative of the Payment System in question and the international bodies concerned with the supervision and oversight of the Payment System.
(7) SAMA shall notify the Payment System Operator of the outcome of a designation assessment. Where SAMA designates a Payment System as a Systemically Important Payment System, its notification shall state the scope of that designation, including a reference to the date from which this categorization will take effect for the purposes of the Payment System’s compliance with the provision of the Law and the Implementing Regulation, the Operating Rules of the Payment System, and the activities that are allowed to be carried out through the Systemically Important Payment System.
(8) SAMA shall publish a notice of designation and record a designation of a Payment System as a Systemically Important Payment System on its public register.
(9) SAMA may enter Payment System Operators that are already subject to its supervision into the register of licensed Payment System Operators after satisfying the relevant requirements.
(10) SAMA may require the Operator of Systemically Important Payment System to cease or amend any of the operations of the Payment System in accordance with the provisions of the Law and the Implementing Regulation and as SAMA may determine. Article 103
SAMA shall set the frameworks and principles related to the interdependence of the various Payment Systems inside and outside the Kingdom.
Chapter 2: PFMI Requirements
Article 104
(1) The Operator of a Systemically Important Payment System must, in relation to its scope of designation, comply with the guidance and standards.
(2) An Operator of a Non- Systemically Important Payment System may have regard to the guidance and standards in accordance with:
(a) Standards and directions related to risk management objectives and the assurance of its compatibility with the Operator work methodology; to ensure the protection and promotion of financial stability.
(b) Standards and principles proportionate to the nature, scale and complexity of the Payment System and Interconnectedness of its operations.
(c) Instructions issued by SAMA within the licensing process or after.
(3) SAMA may impose higher requirements than the PFMI for Payment System Operators on the basis of risks posed by that Payment System and the potential impact on financial stability.
(4) The Payment System Operator should apply these requirements on an ongoing basis in the operation of their Payment Systems and business, including when reviewing their own performance, or proposing new services, or proposing changes to risk controls.
Article 105
(1) A Payment System Operator shall ensure that the following requirements are complied with in relation to the management and operation of the system, namely:
(a) The risks of the Payment Systems are robustly managed to ensure their safety and promote financial stability;
(b) That the operations of the system are conducted in a safe and efficient manner so as to minimize the likelihood of any outage or disruption to the functioning of the system and to achieve a target of at least a 99.98% uptime;
(c) that there are in place Operating Rules that comply with the requirements specified in Paragraph (2) of this Article and with any requirements set by SAMA relating to the Operating Rules of a Systemically Important Payment System, as well as operational agreements as required;
(d) That there are in place adequate arrangements to monitor and enforce compliance with the Operating Rules of the system, including arrangements regarding the resources available to the system operator;
(e) That there are available to the system financial resources appropriate for the proper performance of the system’s particular functions;
(f) Prepare and annually update recovery and wind-down plans in accordance with the relevant international standards and requirements and consistent with the PFMI
(2) The Operating Rules of a Systemically Important Payment System must:
(a) Provide that if a Member becomes bankrupt, he may be suspended from the system;
(b) Provide default arrangements that are appropriate for the Payment System, and ensure that it is comprehensive for all possible circumstances and cases.
(c) Provide appropriate and adequate arrangements to deal with the situation where a system operator, a service provider or a settlement institution of the system is likely to become unable to meet its obligations under or in respect of the system.
(d) Require members to cooperate with SAMA and provide any data, information or necessary documents that may be requested.
(3) SAMA approval must be obtained before approving the Operating Rules for a Payment System or making any changes thereto.
(4) A Payment System Operator must ensure that the operations of the system are being conducted in a safe manner, including:
(a) Verifying the execution and settlement of transfer orders for the purposes of the Payment System and including this in the Operating Rules;
(b) The reliability and robustness of the operation of the system;
(c) Access control over the system;
(d) The integrity of, and access control over, the information held within the system;
(e) The risk management and control procedures relating to the operation of the system;
(f) The soundness of the system, including financial soundness; and (g) The soundness of the services provided to the system by the infrastructure associated with the system;
(5) A Payment System Operator must ensure that the operations of the system are being conducted in an efficient manner, including, in& particular, any matter relating to:
(a) The speed and efficiency with which operations relating to transfer orders within the system are carried out;
(b) The overall reasonableness cost to a Member of his participation in the system, taking into account the services provided by the system to its Members;
(c) The reasonableness of criteria for admission as a Member in the system; and
(d) The reasonableness of measures taken to ensure fair competition, or not to be exploited by the absence of competition, in relation to the functions performed by the system.
(6) A Payment System Operator must ensure a proper and continued functioning of the Payment System and comply with any instructions issued by SAMA and any relevant international standards (including the PFMI). Article 106
(1) The Operator of Systemically Important Payment System must conduct a self-assessment to test its compliance with the PFMI at least once every year or in the event of a material change to its operating systems or as requested by SAMA.
(2) The Payment System Operator shall enable SAMA such access to its Payment System and related information and cooperate as SAMA requires to conduct an assessment of the Payment System in accordance with its authority by the Law.
(3) The Operator of a Systemically Important Payment System must, after obtaining a non-objection letter from SAMA, publicly disclose its responses to a summary of its PFMI self-assessment in-line with the CPMI-IOSCO Disclosure Framework.
(4) The Operator of a Non-Systemically Important Payment System must conduct a self-assessment to test its compliance with the PFMI on the periodic basis agreed with SAMA under its license authorization or as otherwise determined by SAMA. Article 107
(1) The Operator of a Systemically Important Payment System shall ensure that adequate financial resources of its business, including its own capital soundness, are assessed and maintained in respect of the Payment System.
(2) The Operator of a Non-Systemically Important Payment System shall ensure that adequate financial resources of its business, including its own capital soundness, are assessed and maintained as relevant to its business and in a way that is proportionate to its business.
(3) The financial resources to do business maintained in respect of a Non-Systemically Important Payment System shall equal as a minimum the higher of six months’ operating costs arising in connection with the Payment System and ten million SAR in paid-up equity. Chapter 3: Payment Systems Authorities
Article 108
(1) SAMA may request information or documents from the Payment System Operator or one of its Members when performing its duties and functions under the Law and the Implementing Regulation.
(2) Notwithstanding any other powers of SAMA, The Payment System Operator or the Member of the Payment System is required to submit the information or documents within the period specified in the request and the Payment System Operator must procure that the relevant Member provides the requested information or documents.
(3) SAMA may examine any books, accounts or transactions of the Payment System Operator when performing its functions and the Payment System Operator must procure cooperation from the Member as required.
(4) SAMA may require a Payment System Operator or one of its Members to submit to SAMA a report prepared by one or more auditors on matters that SAMA requires for discharging or exercising its duties and powers under the Law and the Implementing Regulation and the Payment System Operator must procure cooperation from the relevant Member as necessary.
Article 109
(1) SAMA may require the Operator of a Payment System to establish rules for the operation of the system, including the operation of services that form part of the Payment System Operation arrangements and provided by a service provider related to the Payment System, or request any amendment or change on the rules.
(2) A Payment System Operator must notify SAMA of any proposed amendment or change to its rules and not change the rules without the approval of SAMA.
Article 110
SAMA may direct a Payment System Operator to take any action necessary to ensure the Payment System compliance with the Law and the Implementing Regulation. Such a direction shall specify the justifications and the actions to be taken or set the standards that must be met in the operation of the system or the services provided through it within the period which SAMA deems appropriate.
Article 111
Notwithstanding any other powers of SAMA, SAMA may appoint one or more Persons other than its employees to inspect the operation of a Payment System or a service provider related to a Payment System and the provision of all services to such a system by a service provider. The Operator of a Payment System must- In accordance with the written permission granted to the person appointed by SAMA:
(a) Grant an inspector access, on request and at any time, to premises on or from which any part of the system is operated or (as the case may be) premises on or from which any part of the services is provided; and
(b) Co-operate with an inspector and Provide all the necessary data, information and documents to help perform their functions. Article 112
SAMA may require the Operator of a Payment System to appoint an expert to report on the operation of the system and impose requirements about the experiences and specialization of the expert to be appointed, the content of the report, treatment of the report (including disclosure and publication) and timing. In the following cases:
(a) The Operator is not taking –as required- sufficient account of guidance, standards and principles set out in the PFMIs; or
(b) A report is necessary for any other reason to assist SAMA in the performance of its functions under the Law and the Implementing Regulation relating to Payment Systems. Article 113
Where action has been taken under default arrangements of a Payment System by the Payment System Operator in respect of a Member in the Payment System, SAMA may direct the Payment System Operator to give information relating to the default to any employee nominated by SAMA. The nominated employee is responsible for assessing and examining any matter arising out of or connected with the default of the Member in that Payment System. The liabilities of Members for any loss arising from the default of the concerned Member and the arrangements to handle any disputes over Members’ liability with respect to default transactions should be clearly set out in the rules and procedures, and any such disputes are subject to the disputes provisions included in the Law and the Implementing Regulation.
Article 114
(1) SAMA may, taking into account the considerations in Paragraph (2) of this Article, determine that the Cross-Border Payment System does not need to be licensed pursuant to the provisions of the Implementing Regulations or that certain provisions and obligations will not be applied or waived, in the event that the conditions of the Cross-Border Payment System comply with the following:
(a) Where a Payment System falls or will fall within the jurisdictional scope set out in Article 4 of the Implementing Regulations, and
(b) In addition to the Kingdom, it or its Operator operates or will operate in one or more additional jurisdictions.
(2) In making such a determination, SAMA shall take into account the following considerations:
(a) The extent to which the Payment System is or will be subject to a regulatory regime and lead or co-supervision by one or more overseas authorities outside the Kingdom, taking into account the nature and basis of that regime and supervision and whether SAMA has an adequate basis for co-operation with such authorities;
(b) The accepted alternate basis for licensing on which SAMA can supervise and enforce the Payment System’s operations as they relate to the Kingdom, including as to rights to information, to give direction and to enforce non-compliance;
(c) The extent to which an alternate basis of oversight and regulation of the Payment System facilitates SAMA having regard to the objective of the Implementing Regulation; and
(d) The extent to which SAMA is able to supervise and ensure the Payment System’s compliance with the PFMI and is able to meet the responsibilities of market regulators identified under the PFMI.
(3) SAMA shall announce the decision taken with regard to dealing with the Cross-Border Payment System and clarify the approach adopted in this regard, taking into account the principles of transparency and disclosure.
(4) Where a Cross-Border Payment System falls within Paragraphs (a) and (b) of Paragraph (1) of this Article, and it or its Operator conducts additional Payment System business outside the Kingdom or otherwise settles Payment Orders to overseas Members, the following must apply:
(a) There must be a Memorandum of Understanding in place between SAMA and the competent authority of the relevant jurisdiction in relation to the supervision of Payment Systems; and/or
(b) SAMA must be satisfied that the jurisdiction in question is regulated on a basis that is equivalent or otherwise enables SAMA to supervise the Systemically Important Payment System in terms of information exchange, cooperation and enforceability. Chapter 4: Finality and Bankruptcy
Article 115
(1) A Systemically Important Payment System must establish rules and procedures as part of its Operating Rules to enable Final Settlement to take place no later than the end of the intended settlement time and date.
(2) The related rules and procedures must also ensure certainty in terms of circumstances under which Final Payment Orders effected through the Systemically Important Payment System are to be regarded as achieving Final Settlement.
(3) Notwithstanding Article 6 of the Law, the result of a transfer of Funds and the Final Settlement of a Final Payment Order and Clearing Arrangements and settlement transactions, Default Management Arrangements and Security arrangements will be irrevocable and shall not be reversed, repaid or set aside. The implementation of the above must not conflict with the Procedures defined in Paragraph (6) of this Article.
(4) In accordance with the application of Articles 6, 9 and 10 of the Law, the Operating Rules of a Systemically Important Payment System must describe the provisions and procedures necessary for all operations and functions, and that including but not limited to:
(a) Payment orders;
(b) Settlement procedures;
(c) Arrangements in relation to Security;
(d) Clearing arrangements;
(e) Guarantees; and
(f) Default management arrangements.
(5) SAMA may request any documents or reports that prove the Operating Rules’ compliance with all the provisions of this Article in any form it deems appropriate.
(6) A Systemically Important Payment System must ensure that its Operating Rules are sufficiently clear on the application of Articles 6, 9 and 10 of the Law, and shall state that the Operating Rules:
(a) The Operating Rules do not conflict with the requirements of protection, validity and binding nature of Final Payment Orders, arrangements in relation to Collateral and Clearing Arrangements; and
(b) The Operating Rules do not conflict with bankruptcy procedures, resolution procedures, winding up procedures (voluntary or otherwise), and any special administration procedures (or similar measures, howsoever named) that are put in place under applicable legislation and regulations related to the Payment System or its Members where such measures involve the suspending of, or imposing limitations on, the execution or completion of payments resulting from Payment Orders.
(7) The provisions of Article 6 of the Law do not apply to Final Payment Orders initiated after the expiry of the calendar day in the Kingdom on which the “Procedures” result in a duly published and notified and enforceable order or instruction of the relevant authority for the cessation of business, winding up, bankruptcy or re-organization of the concerned Systemically Important Payment System or its Members (or the expiry of the day that the voluntary winding up is completed).
(8) SAMA may Exclude a Systemically Important Payment System from some of the provisions of this Article, provided that the exception decision is applied starting from the day following the day on which the decision was issued; the decision shall be published according to the method specified by SAMA.
(9) SAMA may apply some or all the provisions included in this Article on the Operating Rules of a specific Non-Systemically Important Payment System. Article 116
Notwithstanding any other applicable laws and regulations in the Kingdom:
(1) A Payment System Operator must notify SAMA in the event of a Serious Disruption and shall take appropriate measures.
(2) A payment System Operator must prepare the necessary policies and procedures for measures to handle Serious Disruption incidents that result in a total or partial actual or potential failure or suspension of the Payment system or lead to actual or potential bankruptcy of the Payment Systems Operator, and they must include:
(a) Communications to internal and external stakeholders in a timely and methodical manner; and
(b) Steps to resolve issues caused by the Serious Disruption as efficiently as possible. Article 117
(1) The Operating Rules of a Payment System Operator must compel each Member to notify that Payment System Operator forthwith of the bankruptcy, potential bankruptcy or the commencement of bankruptcy proceedings relating to any Member.
(2) A Payment System Operator must notify SAMA immediately of the bankruptcy, potential bankruptcy of a Member or the commencement of bankruptcy procedures relating to that Member.